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Each day FT Leader writers on the Editorial Board meet to discuss the topics to be considered for Leader columns. Here are the issues that dominated this week:

The Editorial Board kicked off the week with a review of the COP27 climate summit. We acknowledged good work in some areas, such as creating a fund to compensate emerging nations.

“But on the central challenge of reducing fossil fuel use and carbon emissions, COP27 has left an alarming hole that future gatherings will have to work even harder to fill.”

We returned to the topic of crypto, as the unravelling of former "exchange" FTX continues. Before crypto rebounds and becomes even more embedded into mainstream finance, a proper rulebook must be written, we urged.

"A near-existential disaster seems to have hit the cryptosphere... The time for politicians, policymakers and regulators to put protections in place is now."

As evidence mounts of the damage being done by hardline Brexit ideologues, our leader team will tonight advise the UK government how to address the issue.
The real Brexit divide

The UK is the only country in the G7 where economic output lags pre-pandemic levels. And its prospects remain bleak,  says the Organisation for Economic Co-operation and Development.

Forecasts for growth are the worst among the G20 group of the world’s top economies, bar Russia. A longer, deeper downturn is forecast even than Germany, whose manufacturing-intensive economy has been hit by high energy prices.

UK public borrowing is rising as the energy cap takes effect. British households are facing the steepest fall in living standards on record.

Rishi Sunak, the prime minister, denies these are symptoms of Brexit.

But in what was widely understood to be a reference to complexities following the UK’s departure from the EU, Álvaro Santos Pereira, the OECD’s acting chief economist, said the UK’s economic adjustment had compounded concerns about low productivity growth.

UK businesses and unions are demanding that plans be scrapped to strip swaths of EU derived law from the British statute book by the end of next year, fearing " significant confusion and disruption".  Earlier in the week the so-called Brexit freedoms bill had been criticised by regulatory experts as " not fit for purpose" . Business leaders want better EU relations.

The UK government this week mentioned a “Swiss-style” trade deal, with selected access to the single market and free movement of people. That led to howls of protest from Tory Brexit hardliners and instant disavowal by Sunak.

Robert Shrimsley argues that the key UK political divide on both left and right is no longer between Leavers and Remainers, but between those keen to make Brexit work better, and those who have no interest in doing so.

For hardline Brexiters, their protests may be counterproductive. “Failure to address Brexit’s worst effects aids those who wish to reverse the whole project, and this has become more pressing since the Truss government helped voters draw a connection between Brexit and economic weakness,” he writes.

Can the UK improve its Brexit deal? Our explainer sets out the chances

In Scotland, labour shortages are fuelling demands for independence. Scots, the majority of whom voted against Brexit in 2016, are split over whether to leave the UK. The UK’s Supreme Court this week ruled against another Scottish independence vote without Westminster’s consent.

As Stephen Bush writes, Brexit is far from being done.

UK gilt crisis fallout

UK pension funds lost £500bn of their value  following the unfunded tax-cutting “mini” Budget in September. The Bank of England was forced to step in to prop up bonds after thousands of corporate pension schemes tried to raise cash to meet collateral calls.

Also this week, insurer L&G blamed the “mini” Budget for the crisis in “LDI” hedging structures buried within many pension schemes.

L&G’s chair and chief executive were answering questions on the crisis from the House of Lord’s industry and regulators committee. They conceded that the FTSE 100 group should be on a closer look out for “black swan” events.

“No one involved in this — the regulators, the central bank, the government, the advisers, the funds, the sponsors, or us — believed that it was a plausible scenario that the government would do something that would create such extraordinary instability in the market in two trading days,” said L&G’s chair Sir John Kingman.

FTX’s ‘complete governance failure’

According to John Ray III, the US insolvency expert who oversaw the liquidation of Enron, the bankruptcy of FTX was the worst case of corporate failure he had seen in 40 years.

Ray said he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information”.

Digital asset markets are in crisis after the collapse of Sam Bankman-Fried’s $32bn crypto exchange this month.

The chaos and mismanagement at the heart of the business included a “concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals”, according to a statement by Ray filed at the federal bankruptcy court in Delaware.

He reeled off a litany of failures, including payments approved through the use of “personalised emojis”.

Bankman Fried has issued a mea culpa in a letter to his former employees.

What are the regulatory lessons from the FTX debacle? Robert Armstrong argues that crypto assets should be regulated differently from finance in future.

He points out that one underlying problem is that we don’t know yet what crypto assets are. Are they currencies, commodities, investment contracts or something else?

“We don’t even know if crypto assets are investment products at all, but if we regulate them that way, that’s what they will become.”

Best of business news

Two stories this week highlight regulators' increasing scrutiny of ESG investments in the face of growing accusations of greenwashing .

Europe’s top asset managers - Axa, Amundi and NN Investment Partners among them - are downgrading ESG funds holding tens of billions of dollars of client money that had previously been marked at the highest level of sustainability. They say confusion over new EU sustainability rules forced the downgrades.

Goldman Sachs, meanwhile, is to pay $4mn in regulatory fines for misleading customers over ESG investments. Employees completed certain ESG questionnaires for evaluating companies included in the funds after securities were already picked, the Securities and Exchange Commission said.

ESG investment products are the fastest-growing segment of the asset management industry, with assets rising to an estimated $2.7tn in 2021. Critics argue that certain companies and investors have used ESG, which remains loosely defined, to make unrealistic or misleading claims about their sustainability and governance credentials.

In the UK, the outlook for commercial property is worsening as values fall and lenders retreat.

“We are sitting in a market that is close to a credit crunch,” says Raimondo Amabile og PGIM Real Estate, an arm of US insurer Prudential Financial, whose fund is one of the biggest investors in the US, France, Germany and the UK.

Office landlords, still struggling with the fallout of the pandemic, are among the most exposed. Occupancy rates are half pre-Covid levels at just 30 per cent, according to Remit Consulting. Construction is slowing as businesses reassess what they need.

In the world of sport, the Glazer family is considering selling Manchester United.  It is searching for outside investments, and said it would consider a sale at the right price.

MUFC is worth $4.6bn, according to Forbes, well above the $2.5bn equity market capitalisation implied by the club’s share price, which rose by 15 per cent on reports of the Glazers’ interest in a sale.

David Beckham, the former Old Trafford player and England captain, is open to talks with potential bidders to back their bids and boost their chances of success.

In the US media and entertainment industry, Disney executives staged a revolt against chief executive Bob Chapek in a covert campaign to overthrow him after he lost the confidence of some members of his team. Chapek was replaced this month by his predecessor Bob Iger, after 33 months at the helm.

Iger was paid $10mn to advise his successor during his time away from the company, despite the pair being barely on speaking terms.

Disney executives began approaching the board a few months ago to express concerns about Chapek’s leadership. “[The board] were clueless about what to do,” said one source.

US media correspondent Anna Nicolau argues that Disney should not be so reliant on one man.

“The fact that a company that employs hundreds of thousands of people can seemingly falter without one specific person in charge, is not a fantastic sign.”
Cyber security and M&A: what boards need to know

This article is brought to you by FT Specialist’s Agenda, a publication that focuses on corporate boards.
What is the future for ESG and sustainability reporting? Is 2023 the year to ramp up investment? What are the consequences of doing nothing for business reputation and investors? And what are the wider advantages of solid accountability? Join FT journalists and industry leaders on December 13 for a virtual seminar. More details here.
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